Gold prices hit six-year high, seen heading to Rs 34,500

Gold prices in the domestic futures market have touched a six-year high ahead of the US Federal Reserve meet. If the Fed goes for a nil interest rate hike as anticipated by the market, prices in the spot market can probably revisit the all-time high levels, find experts.

Gold prices hit six-year high, seen heading to Rs 34,500
Gold prices hit six-year high, seen heading to Rs 34,500

Gold prices in the domestic futures market have touched a six-year high ahead of the US Federal Reserve meet. If the Fed goes for a nil interest rate hike as anticipated by the market, prices in the spot market can probably revisit the all-time high levels, find experts.

Gold has been on an upward stride for the past two weeks, especially in the past two days. In the international market it has moved up from $1,280 per ounce levels to $1,308. This helped the prices in the Multi- Commodity Exchange touch a six-year high of Rs 32,700 per 10 gm, a level seen last in August 2013. In the national capital spot market, prices were trading around Rs 33,750 per 10 gm.

“Gold prices have been moving in a positive note since January. In the past two days prices have risen from below $1,280 levels to $1,308 as the Fed interest rate futures market has been speculating about a nil hike in 2019. US president Donald Trump has been criticizing the Fed’s hawkish stance and the Fed also has indicated that it may go slow on rate hikes. This saw the dollar index inching down to 95 levels, increasing the appetite for gold,” said Himanshu Gupta, vice president and head of commodities and currencies research, Globe Capital.

The IMF’s prediction of lower economic growth in 2019 due to trade wars between the key economies has been creating uncertainty in the market. This has reflected in the volatility in the equity markets and risk-averse assets like gold have gained from this volatility.

Adding to the worries, European Central Bank also has been signaling that it was in no hurry

to tighten the monetary policy.
 “January has seen strong buying in gold both in Comex and domestic market on the back of flat movement in the dollar index and weakness in the rupee, which has helped gold in the domestic markets to scale higher,” said Jateen Trivedi, research analyst, Bonanza Portfolio.

Going ahead, the Fed's statement and policy decision shall give further direction to the yellow metal. With markets anticipating a dovish stance, prices can rally till $1,325 to $1,345 in the coming month or so in the Comex, he said.

Gupta finds that in the immediate short-term, gold can move towards $1,320 and $1,325. This will help domestic gold prices move up to Rs 34,500 per 10 gm and this would be all-time high levels in the Indian spot market.

However, chances of a consolidation post these levels also cannot be ruled out. “If the Fed takes a neutral stance during the meeting, prices may consolidate for a while,” he said.